French Q2 GDP growth unchanged at 0.2 pct, household consumption to remain subdued in coming months

French second quarter GDP growth’s second estimate affirmed the preliminary figure of the growth of 0.2 percent quarter-on-quarter growth. This was the same as the first quarter growth; however, it was a considerable deceleration from last year when the French economy had grown 0.6 percent to 0.8 percent quarter-on-quarter each quarter.

Business investment mainly drove the economic growth, rising 1.3 percent quarter-on-quarter after a rise of just 0.1 percent in the first quarter. In all, investment was up at a more modest pace of 0.8 percent. However, it contributed positively to the rise in GDP.

On the other hand, net trade contributed negatively by 0.3 percentage point to the GDP growth, but that was partially countered by 0.2 percentage point positive contribution by stock building.

Meanwhile, private consumption fell for the first time in nearly two years, dropping 0.1 percent quarter-on-quarter. Looking ahead, weak French household consumption growth is likely to continue, with today’s monthly release of consumer expenditure on goods showing growth in July of just 0.1 percent sequentially and 0.2 percent year-on-year, down from an upwardly revised 0.3 percent and 0.5 percent in June, noted Daiwa Capital Market Research in a report.

Delving into details, the softness was broad based. Food expenditure dropped 1 percent year-on-year, while energy fell 0.2 percent. While the engineered goods category recorded a small rise, it was mainly driven by purchases of transport equipment, while other components recorded much lower readings.

“With yesterday's consumer sentiment survey reporting stable but below-average confidence levels, and rising concerns about the labour market, it appears that we are unlikely to see a sharp recovery in French household consumption growth over the coming months”, added Daiwa Capital Market Research.

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